Our modern age is most certainly an age of speedy convenience. We have grown so accustomed to instant gratification through all the “quick” options for our lives: drive-thru windows, using your cell phone as a credit card, online bill pay, and the list could just go on. It is easy also to lump the idea that boosting your credit score can also be accomplished in such a speedy, convenient manner. Take a minute to learn more about why patience is a virtue for winning the credit race and pick up some great credit building techniques along the way.
The Pieces of a Good Credit Score: Installment Loans
Building your credit is like building any physical structure; you need to start with a solid foundation and gradually build up from there. This is how you need to approach your strategy for building your credit score and improving your credit report. Exhibiting regularly occurring responsible behaviors, such as paying your bill on time over time, is one of the best ways to accomplish a great credit score. One of the best ways to exhibit this behavior is with an installment loan.
An installment loan is simply a loan returned to the lender in installment payments over fixed intervals of time. Student loans and mortgages are two examples of installment loans; you return what is owed over set monthly payments at a fixed rate (i.e., monthly).
Consistently paying installment loans over time is a great credit score building technique due to your demonstration of reliability. This also makes you a more eligible candidate for any other loans you apply for, as lenders can see you already possess all the qualities for which they evaluate when considering your creditworthiness.
Credit Report and Current Employment: Maintaining a Good Job
Employment history is something that appears on your credit report and is a crucial determining factor for lenders when determining your creditworthiness. A stable and continuous employment history is indicative you can handle making prompt payments over extended periods. A job history with varying positions and varying salaries does not give a lender the same level of confidence you will be able to pay in full as required if you have the potential to bring in differing amounts of income by month.
Don’t Let Go Just Yet: Keeping Old Accounts Open
It might seem logical to close out old accounts, following the idea of “out with the old, in with the new”. Consider your credit utilization ratio before closing an account you have not used. Since the credit utilization ratio is directly linked to the credit available, having an old account open can boost your percentage. As long as you keep the balance low and pay on time, it is beneficial to hold on to some for the long-term positive impact on your credit score.
The story’s moral is that achieving and maintaining good credit is a long-term commitment. Setting yourself up with the best possible credit report and score is a marathon, not a sprint. Being responsible and consistent are the keys to your success to winning the credit race.
